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TMI Blog2013 (7) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... ployees' phone policy" and assessable value of free calls escaped taxation. Merely creating a fiction of no consideration received by the appellant in respect of the aforesaid nature of free service provided by it, the appellant appears to have been immensely benefited by reduction of monetary package of remuneration to its eligible, employees, their relatives and employees of Bharti Group of companies. Such undisclosed benefit of appellant was at the cost of Revenue. The appellant failed in the course of hearing to satisfy that value of service were disclosed perquisite to its employees in its account and disclosed to Income tax Authority. The circular on which appellant was relying was withdrawn – and the withdrawn circular cannot over ride the law relating to taxation of taxable service provided - the appellant misconceived the circular for a misplaced sympathy. Plea time barred - extended period of limitation – Held that:- Time bar plea of appellant was baseless - the appellant deliberately suppressed material facts without providing details to the department nor it was registered - Show cause notice were issued to the appellant consequent upon audit finding relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 125,00,00,000/- under Section 78 of the said Act followed by interest under section 75 as well as penalty under section 76 77 of the Act Option was granted to the appellant to discharge the tax demand with interest and 25% of the penalty determined u/s 78 of the Act within the period prescribed by law. Without exercising such option, against above demand, the appellant came in appeal before the Tribunal challenging the adjudication with a stay application for stay of realisation of the same. 2.1 Object of the policy stated aforesaid reads as under (Ref: page 140 of appeal folder): "Bharti Airtel Limited (herein referred to as The Company) wishes to offer its employees the opportunity to avail the option to use Airtel services at special terms and conditions. The Company also wishes to ensure that this offer will be implemented in a fair and transparent manner and that any abuse of the offer is avoided." 2.2 The policy also aimed to: (a) Set out the eligibility criteria for free and/or discounted Airtel services. (b) Describe the services and charges that will be applicable under this policy. (c) Describe the exemption limits for charging. (d) Desc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... family members were also getting such free service up to certain limits and beyond that limit certain charges were fixed to be recoverable. Any employee availing free use of telecom service of appellant beyond permitted limit, was to prove that excess uses were directly work related so that exemption was permitted. 3.1 While the appellant claimed that the value of aforesaid free service is nil, Clause 3.3.4 of the Policy prescribed mode of valuation of such service as is exhibited by the Table there under. The appellant did not disclose aggregate value of free service provided under Jurisdiction of the learned Adjudicating Authority to its employees and their family members as well as Bharti Group of Companies under law and also failed to produce relevant details and failed to establish that it had maintained proper account to determine value of taxable free service provided by it. That caused loss of Revenue. 3.2 According to Revenue, value of free service provided by appellant was "for a consideration other than cash" and taxable and such value was determinable according to Rules of valuation prescribed by section 67 of the Act to form part of the assessable value of taxable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sked to furnish PAN details and amount of waiver granted to the employees from October, 2004 to September, 2009, by letter dated 20.4.2010, it expressed its inability to provide information and informed that it shall furnish the same after 25.4.2010, keeping Revenue awaited. 4.3 For the prejudice caused to Revenue, show cause notice was issued by the respondent on 23.4.2010 to the appellant proposing to resort to section 72 of Finance Act, 1994 to make best Judgment assessment. Upon examination of the materials gathered by investigation, ld. Adjudicating Authority on Consideration of defence of appellant, framed following issue in Para 33 of adjudication order reading as under and adjudicated the demand to the extent indicated at the outset:- "The basis issue to be decided in the instant case is whether the free usage of telephone, mobile, internet service provided by the assessee to its employees, employees of Bharti Group of companies and relatives of the employees, is chargeable to service tax and whether the assessee is liable to pay service tax amounting to Rs.118,70,19,472 (including education and higher education cess) for the period October/2004 to September/2009 und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice provided by the appellant by letter dated 10.2.2008 stating that these was no value received and no consideration was involved. Therefore such transaction cannot be subject to service tax when the service provided to the employees does not give rise to any benefit/amenity to them. It cannot be termed as perquisite in the hands of employees since such facility was provided by the appellant company purely for the purpose of business and commercial and not for any personal use/benefit gained by the employees. (5) There being no flow of any consideration/value from employees to the appellant company, there shall be no levy on the appellant. (6) Demand was inflated in the adjudication without considering the facts and figures giving rise to mathematical error when billing was done for each employee from whom excess calls beyond permitted limit was recovered. It was submitted that if at all there shall be demand that shall be reduced to Rs. 21 crores and the adjudication is subject to limitation. (7) Adjudication was time barred since inquiry was conducted in 2008 and show cause notice was issued on 23rd April, 2010. (8) The object of the policy being to provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence was established by appellant demonstrating its case that free calls provided were exclusively meant for providing any taxable out put service. 6.5 The crafty language of the policy does not grant immunity to the appellant when substance of the matter is looked into. Relying on page 144, 148, 149, 155 157 of appeal folder it was submitted that a planned evasion was made by the Appellant in the name of "employees' phone policy" and assessable value of free calls escaped taxation. 6.6 Relying on para 38 of adjudication order (at page 87 of appeal folder) it was submitted by Revenue that circular relied upon by the appellant was withdrawn by circular No. 96/7/2007-ST dated 23.8.2007 and the circular so withdrawn cannot even over ride the law relating to taxation of taxable service provided. The appellant misconceived the circular for a misplaced sympathy. That circular was on a different proposition other than the case of the appellant. 6.7 Time bar plea of appellant was baseless when the appellant deliberately suppressed material facts without providing details to the department under Delhi Jurisdiction nor it was registered in that jurisdiction prior to 1.10.2009. Show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determine the value of taxable services for the period prior to 9/5/2009 was without any merit. The computation of service tax in the case of assessee is based on the facts and the actual amount of tax in respect of their Bangalore Circle. The Best judgment method was introduced vide Finance Act 1994 for making an assessment of the value of taxable services after taking into account all relevant material, when the assessee fails to assess the tax in accordance with the provisions of the Act. In is not the case that during the period 10/9/2004 to 10/5/2008 there was no service tax liability on telephone/telecommunication services provided by the assessee, who did not furnish any information and figures to the department regarding its policy of CFA to its employees and their relatives. The two show cause notices were issued to the assessee on the basis of actual figures supplied by them. The show cause notice under adjudication was issued to them on 23/4/2010 i.e. when the Best Judgment Method was very much in existence. The ratio of the judgments cited in support relates to Income Tax cases and the same are not applicable in the present case as the facts and circumstances are not th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risdiction. PRIMA FACIE CONSIDERATION BY TRIBUNAL 7. We have heard both sides extensively and also perused the impugned order as well as respective evidence to which our attention was drawn in the course of hearing. 8.1 There is no dispute that the appellant provided option to its employees, employees of Bharti Group company as well as selective relatives of such employees who were eligible as described in clause 1 of the policy. The eligible employees were treated as regular post paid customers. Service provided by the appellant was mobile phone connection/fixed line and Broad Band services and fixed wireless phone as well as Black Berry services or push mail service under clause 3.2 and 4.1 of the policy. Various modalities of providing such services were stated in clause 3.3.2 of policy. Clause 3.3.3 gave another option to the employees to avail free calls to the extent of 20% of the amount against fixed line and the rest against mobile. Calls to certain limit were provided free and beyond that was recoverable as per clause 3.3.4 read with clause 3.3.3 of the policy. 8.2 So far as Black Berry service is concerned, Para 4 of the policy dealt with the same. In terms of Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite which was part of their remuneration package and was incentive other than cash at the cost of Revenue and such benefit was provided evading service tax. Similarly, the package also included free service to the relatives of the employees. So also employees of Bharti Group companies for no output service linked to such benefit under Finance Act, 1994. 8.6 Bare perusal of respective clauses of telecom policy prima facie throws light that service recipients of free telecom service provided by appellant were employees of the appellant, their relatives and Bharti Group companies who otherwise would have paid service tax for the telecom service availed had there been no exercise of option by them under the Policy of Appellant or availed such service from other telecom service providers. The value of charges indicated in the policy was found by the learned Adjudicating Authority as far below the market charges. The manner of providing free telecom service by appellant was made apparently shows that perquisite was given to the employees in the garb of free calls at reduced rate beyond certain call limit without payment of service tax and the appellant was enriched at the cost of Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mination of liability of the appellant, plea of time bar failed to get any support for which that was discarded by learned Adjudicating Authority in Para 42 of his order. 8.9 When the appellant pleaded that there should be Revenue neutrality that was also discarded by the learned Adjudicating Authority in Para 41(ii) of the order bringing out that there was no integral connection between the calls allowed free by the appellant and the taxable output service that produced. Therefore appellant's failure to furnish relevant facts and figures denying liability proved suppression. That has been brought out in Para 42 (iv) of adjudication order. 8.10 Revenue did not fail to workout the liability taking into consideration the law relating to value of service depicted in Para 38 of the order which appears to be reasonably done in Para 40 of adjudication order. Prima facie, it appears that taxable service provided was determinable and has escaped levy of service tax. According to Rule of Valuation prescribed under section 67 of the Act, the economic activity carried out by appellant had economic value. Circular relied upon by the appellant cannot run counter to the law as taxable servic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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